Next warns over "significant" COVID-19 hit as recent sales plummet 30%

Retail chain Next has warned it is preparing for a “significant” trading downturn amid the COVID-19 coronavirus pandemic as it revealed full-price sales have tumbled by 30% in recent days.

The group said stress tests showed the business could “comfortably sustain” more than £1 billion loss of sales over the full year – including sales declines of up to 100% in some weeks during the peak of the outbreak.

Online sales are likely to fare better than its 498 stores due to social distancing measures, but it gave a bleak outlook for trading in the coming months, cautioning that “people do not buy a new outfit to stay at home”.

The comments came as Next reported a better-than-expected 0.8% rise in pre-tax profits to £728.5 million for the year to January as overall full-price brand sales lifted 4%.

Next chief executive Lord Simon Wolfson said: “When the pandemic first appeared in China, we assumed that the threat was to our supply chain.

“It is now very clear that the risk to demand is by far the greatest challenge we face and we need to prepare for a significant downturn in sales for the duration of the pandemic.”

He added: “Online sales are likely to fare better than retail but will also suffer significant losses – people do not buy a new outfit to stay at home.”

Recent trading results have showed the toll taken on sales as Britain has begun to go into lockdown, with total sales swinging from a 2.1% rise in the final week of January to an 8.8% drop last week and 30% plunge since Sunday.

It cautioned that sales could even fall by 100% for as long as a month in its worst case scenario, before gradually improving as the outbreak passes – leaving overall sales 53% lower over the affected period.

But the group said this is seen as an “overly pessimistic” sales scenario.

In the event of a prolonged closure period and no government assistance, Next cautioned it may be forced to take “radical” action on wages to help cut costs.

But it hopes it can offset a severe trading hit by not requiring staff to work more than their contracted hours and, in the short term, not replacing leavers.